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Navathe AS, Liao JM, Shah Y, et al. Characteristics of Hospitals Earning Savings in the First Year of Mandatory Bundled Payment for Hip and Knee Surgery. JAMA. 2018;319(9):930–932. doi:10.1001/jama.2018.0678
Since April 2016, Medicare has bundled payments for hip and knee surgery at 799 hospitals through the Comprehensive Care for Joint Replacement (CJR) program, which combined payments for hospitalization and postdischarge care in the following 90 days into a single benchmark. CJR incentivizes quality and cost containment by providing retrospective bonus payments that increase as hospitals exceed their quality and cost benchmarks. Initially, Medicare required participation from hospitals in 67 urban markets defined by metropolitan statistical areas (MSAs),1 favoring MSAs with above-average episode spending and adequate procedural volume. However, Medicare recently indicated that most hospitals in 34 of 67 MSAs are required to continue in the CJR program (mandatory markets) while low-volume hospitals and others in the remaining 33 MSAs could elect to continue or withdraw (voluntary markets).2 Given this policy shift and its implications for the national debate about mandatory bundled payment, understanding how different hospitals fared in the first year of CJR is salient for policy makers, clinicians, and health care organizations.
The University of Pennsylvania institutional review board approved the study.
We used Medicare data to identify and describe the proportion, distribution, and quality performance of CJR hospitals that achieved episode savings (savings hospitals) in performance year 1 (April 2016-March 2017).1,3
We compared organizational characteristics and safety-net status between savings and other nonsavings CJR hospitals using data from the American Hospital Association.4,5 To compare baseline episode volume, quality (risk-standardized readmission and mortality), and spending, we defined the pre-CJR baseline period from April 2015 to March 2016. Volume was assessed using 100% Medicare claims for 2015-2016. For other measures, we constructed joint replacement episodes using a 20% random sample of Medicare claims and CJR’s methodology, combining all health care services paid by Medicare for joint replacement hospitalization and 90 days of postdischarge care.6 We described the proportion of savings hospitals in mandatory and voluntary markets.
We compared categorical variables using χ2 tests and continuous variables using t tests, Kruskal-Wallis, and Wilcoxon rank sum tests. We compared baseline performance using hierarchical, multivariable, generalized linear models adjusted for patient characteristics (Table) with hospital savings group (savings and nonsavings hospitals) fixed effects and standard errors clustered at the hospital level. Analyses were performed using SAS (SAS Institute), version 9.4. Statistical tests were 2-tailed and significant at an α level of .05.
Of 799 CJR hospitals, 382 (48%) were savings hospitals. Mean episode savings varied from $13.83 to $3590.97 (Figure), and 351 hospitals (92% of savings hospitals) achieved good or exceptional quality, as defined by Medicare. The proportion of savings hospitals in any given market ranged from 0% to 100%.
Compared with nonsavings hospitals, savings hospitals were larger (mean No. of hospital beds, 301 for savings hospitals vs 230 for nonsavings hospitals; P < .001) (Table) and had higher volume (mean annual Medicare joint replacement volume, 216.9 for savings hospitals vs 133.3 for nonsavings hospitals; P < .001). Savings hospitals were more likely to be nonprofit (70% for savings hospitals vs 53% for nonsavings hospitals; P < .001), teaching (62% for savings hospitals vs 52% for nonsavings hospitals; P = .004), and integrated with a post–acute care facility (55.8% for savings hospitals vs 40% for nonsavings hospitals; P < .001) than nonsavings hospitals. A greater proportion of nonsavings hospitals were low volume (2% for savings hospitals vs 23% for nonsavings hospitals; P < .001) and safety-net hospitals (22% for savings hospitals vs 37% for nonsavings hospitals; P < .001). Case-mix severity did not differ by savings groups.
Savings hospitals exhibited similar baseline quality to nonsavings hospitals, but savings hospitals had lower baseline spending ($22 974 in savings hospitals vs $23 977 in nonsavings hospitals; P = .001) (Table). The proportion of savings hospitals did not differ between mandatory and voluntary markets (48% in mandatory markets vs 49% in voluntary markets).
In the first year of the CJR program, savings and nonsavings hospitals differed with respect to several characteristics and baseline spending. Limitations include a lack of performance data for nonsavings hospitals and possible bias from a 20% claims sample. Nevertheless, these findings suggest that certain hospital types may be better positioned to succeed in mandatory bundled payment compared with others, particularly as policy changes affect the number and composition of hospitals and markets required to participate.
Accepted for Publication: January 19, 2017.
Corresponding Author: Amol S. Navathe, MD, PhD, Department of Medical Ethics and Health Policy, University of Pennsylvania, 1108 Blockley Hall, 423 Guardian Dr, Philadelphia, PA 19104 (firstname.lastname@example.org).
Author Contributions: Dr Navathe had full access to all of the data in the study and takes responsibility for the integrity of the data and the accuracy of the data analysis.
Concept and design: Navathe, Liao, Emanuel.
Acquisition, analysis, or interpretation of data: All authors.
Drafting of the manuscript: Navathe, Liao, Shah, Lyon, Chatterjee, Emanuel.
Critical revision of the manuscript for important intellectual content: Liao, Lyon, Chatterjee, Polsky, Emanuel.
Statistical analysis: Navathe, Shah, Chatterjee, Emanuel.
Obtained funding: Navathe.
Administrative, technical, or material support: Navathe, Liao, Lyon.
Conflict of Interest Disclosures: All authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest. Dr Navathe reported grant funding from the Hawaii Medical Services Association and Oscar Health Insurance; serving as advisor to Navvis, Navigant, Lynx Medical, Indegene, and Sutherland Global Services; and receiving an honorarium from Elsevier Press. Dr Polsky reported grants from Pfizer and personal fees from the American Dental Association. Dr Emanuel reported receiving speaking fees from numerous entities, stock ownership in Nuna, and investment partnership in Oak HC/FT. No other disclosures are reported.
Funding/Support: This research was supported in part by the Commonwealth Fund.
Role of the Funder/Sponsor: The Commonwealth Fund had no role in the design and conduct of the study; collection, management, analysis, and interpretation of the data; preparation, review, or approval of the manuscript; and decision to submit the manuscript for publication.
Additional Contributions: We thank Qian Huang, MPH (University of Pennsylvania), for carrying out additional statistical analysis for this study and Jingsan Zhu, MS (University of Pennsylvania), for statistical guidance. They did not receive compensation for their contribution.